Civic body invokes force majeure in favour of city builders

In a circular issued last week, Mumbai municipal commissioner Praveen Pardeshi ruled that the validity of all IODs (Intimation of Disapproval), expiring between March 1, 2020 and June 30,2020, had been extended up to September 30, 2020.

The move comes at a time when the jury is still out on whether the pandemic had triggered a force majeure. (File)

Just as debate rages on in legal circles on whether force majeure will apply to COVID-19, authorities in Mumbai have invoked the clause to grant a major relief to city builders.

Applying force majeure, the Brihanmumbai Municipal Corporation (BMC) has extended the validity of various development permissions granted by it for building constructions in the commercial capital.

In a circular issued last week, Mumbai municipal commissioner Praveen Pardeshi ruled that the validity of all IODs (Intimation of Disapproval), expiring between March 1, 2020 and June 30,2020, had been extended up to September 30, 2020.

An IOD is the initial development permission given to a project, which lists conditions for compliance before the commencement of actual construction work. All other development permissions, including commencement certificates, Transferable Development Rights Certificates, letters of intent, debris management plans, no dues certificates from various department, etc, whose validity was expiring between March 1 and June 29, too have been extended till June 30, provided a formal application for revalidation is made on or before the extended cut off date, said officials.

While there are no provisions in the Mumbai Regional and Town Planning Act, 1966, which governs the municipality’s functioning, regarding force majeure, the municipality has cited the unprecedented shutdown to contain the COVID-19 outbreak and how it has impacted the construction industry gravely to justify its use. “In view of the COVID-19 outbreaks and the subsequent lockdown, various industry outfits had reported that applications for renewal (of development permissions) could not be submitted. Those submitted online could not be processed, since the office of the architects, license surveyors and the project proponents being closed. It is therefore necessary to consider the force majeure situation arisen,” wrote Pardeshi in the circular.

The move comes at a time when the jury is still out on whether the pandemic had triggered a force majeure. Broadly, the courts have interpreted the term as an event that neither be anticipated nor controlled by either of the parties involved in a contract. Provisions of force majeure generally cover natural disasters like hurricanes, floods, and earthquakes as “acts of god”. Other covered events may include war, terrorism, civil disorder, among others.

When contacted, Vinod Chitore, BMC’s Chief Engineer (Development Plan), pointed out that Maharashtra’s Real Estate Regulatory Authority and the Union Ministry of Environment and Forests, too, had relied on the clause for revalidation of orders granted by them.

While city builders welcomed the move, most are pitching for even more perks and an economical revival package for the construction industry. “We (the construction industry) were already reeling under a slowdown. The disruption caused by the pandemic is a killer blow. While the revalidation of permissions is welcome, the government and the civic body must announce an amnesty for all schemes for penalties and amounts payable by existing projects and should also provide interest subsidies on loans,” said Rajesh Jain, chairman, NEUMEC group, which is undertaking a number of projects in the island city of Mumbai.

“The main worry is the total destruction of demand brought on by the lockdown. One senses that it will be a while before the buying sentiment is restored among citizens,” said Jain. Bhavik Mehta, partner, Namo Realty and Infra LLP, echoed Jain’s concerns. Mehta, also a committee member of the Brihanmumbai Developers Association, a representative body of mid-sized developers mainly from the suburbs of Mumbai, said, “The government must consider a GST relief for sale apartments. Also construction premiums should be sized down.”

“The moment the lockdown is lifted, one feels that stranded migrant workers will rush to their native places. The ones that have already reached home states will also take a while before coming back given the challenges they have faced during the lockdown. It will be a good year and a half before normalcy returns to construction activity,” said Jain.